AAA: Gas prices up for third consecutive week
Declining gas prices appear to be a thing of the past, at least for the remainder of the summer. Gas prices have risen for the third consecutive week and so far in July, prices at the pump have reversed the 58-cent decline in May and June, up 12 cents since the beginning of the month. The national average gas price hit a four-week high of $3.45 Friday, up 6 cents for the week, yet down 4 cents from month-ago and down 23 cents from year ago prices.
Rising gas prices in July also occurred last summer after prices fell 44 cents per gallon from a high of $3.98 on May 5 to a summer low of $3.54 on June 30. Last year prices increased 17 cents in July and remained elevated through Labor Day before declining following the busy summer driving period. This week also marked an important date for the gasoline market – the four year anniversary of the all-time high retail gasoline price of $4.11 per gallon set on July 17, 2008.
While the broader global economic and demand concerns that pressured crude oil prices dramatically lower this spring remain, prices have increased over the last several weeks as supply concerns, along with better than expected global economic news, have pressured oil prices higher. Stronger global economies would be expected to demand more crude oil which puts upward pressure on prices.
The most important supply threat to oil for now is from the Middle East, as global powers try to force Iran to halt its disputed nuclear program. Tension escalated after a bus carrying Israeli tourists was bombed in Bulgaria, for which Israel blamed Iran. Analysts cautioned that concerns about supply from the Middle East are far from over and such concerns would limit any further slide in oil prices. Oil has gained more than 17 percent since the low it touched last month, largely because of reinforced worries about potential conflict between Iran and some Western nations over Tehran’s disputed nuclear program. The commodity saw its seven day streak of gains halted Friday, due to profit sharing and a stronger U.S. dollar, although crude oil remains firmly planted above the $90 per barrel mark (a level not seen since late-May). Crude oil closed the week at $91.83, gaining more than 5 percent for the week and posting its third weekly gain in four.
In its weekly report, the Energy Information Administration (EIA) reported the nation’s crude oil stocks fell 809,000 barrels to 377.4 million barrels, following last week’s 4.7 million barrel plunge. Current crude supplies are 7.3 percent above year-ago levels and over the upper limit of the average for this time of the year. Gasoline stocks dropped 1.8 million barrels to 20.59 million barrels, the first decrease in five weeks, leaving the existing inventory level 3.1 percent off year-ago levels and in the lower limit of the average range.
“The gas price low of $3.33 per gallon at the end of June could very well have been the bottom for the summer driving season,” said Martha M. Meade, Manager of Public and Government Affairs for AAA Mid-Atlantic. “Analysts believe that as the summer vacation travel ramps up into August, gas prices are likely to remain in the $3.30 to $3.50 per gallon range from now through Labor Day, barring an unforeseen supply disruption such as a hurricane or international geopolitical conflict.”
The roller coaster ride that has been 2012 gas prices, while currently on the upswing, is expected to trend downward again in the fall. Tom Kloza, Oil Price Information Service (OPIS) chief oil analyst and AAA partner, expects gasoline prices to range between $3.30 and $3.50 per gallon from now until Labor Day. By next year, the U.S. Energy Department’s EIA estimates prices at the pump should drop below current levels to an average of $3.28 per gallon due to depressed consumer demand and likely declines in crude oil prices, as noted in the agency’s Outlook report.